Stewardship Code
Trinity Street Asset Management LLP (“Trinity Street” or the “Firm”) is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”) and is registered in the United States as an investment adviser with the U.S. Securities and Exchange Commission (“SEC”).
UK authorised asset managers are required to disclose via their websites whether they commit to the UK “Stewardship Code” (the “Code”) overseen by the Financial Reporting Council (“FRC”) and, if they do not, provide information on their alternative investment strategy.[1]
The Code is a voluntary code for asset managers comprising a set of twelve ‘comply or explain’ principles addressing how managers act to create long-term value for clients and beneficiaries leading to sustainable benefits for the UK economy, the environment and society. The Code recognises the importance of the environment, in particular climate change, and social and governance factors (collectively “ESG”) as a consideration for managers making investment decisions.
The Code was first published in 2012, was updated in 2019 (applicable 1 January 2020) and is, as at the date of this notice (December 2024), subject to further and ongoing review by the FRC.
Trinity Street believes in the importance of good stewardship and supports the broad underlying objectives of the Code but not all elements of it are aligned to the investment activities currently undertaken by the Firm. Accordingly, Trinity Street has chosen not to commit to the Code at this time. The Firm will review its position on commitment to the Code if relevant.
Shareholder Rights
Pursuant to FCA Conduct of Business Rules[2] designed to encourage long-term shareholder engagement and transparency between investors and listed issuers, the Firm is required either to develop and disclose an engagement policy that meets the requirements of the rules or to disclose a clear and reasoned explanation of why it has chosen not to develop such a policy.
Trinity Street has an engagement policy, key aspects of which are described below.
Definition of engagement - Trinity Street defines engagement as an in-person or virtual meeting, telephone call or any written correspondence with a potential or current holding for the purposes outlined below. The meeting will include representative(s) from Trinity Street’s investment team. Engagement is typically undertaken with a company’s executives, senior managers, investment relations team and/or board members as the context requires. Specialists from a company may also be involved in the engagement; examples may include sustainability, operational, and/or departmental experts. Engagement may focus on specific areas in single engagement sessions or be in areas that are discussed over longer periods of time.
Integration of shareholder engagement
Trinity Street seeks to be active and to engage with issuers on how they can improve their ESG and by extension, financial outcomes. Where necessary this engagement is carried out as part of ongoing dialogue with company management and/or investor relations. The Firm engages with investee companies where relevant to its investment case in order to promote environmental and social issues, considering systemic/thematic issues alongside company-specific issues. Thematic issues promoted are grouped within the categories set out below, all of which correlate closely to shareholder value:
During the pre-investment phase Trinity Street assesses an issuer’s quality of management and any disclosures on the topics listed above, including as relevant its track record and any published commitments. Where quantitative scoring is provided by the Firm’s data providers, and where external and/or quantitative data is available, these are incorporated into the assessment. The same process is used for considering company-specific topics and the assessment is recorded in the investment case built up for each company. For specific products, where relevant, the Firm reports on the proportion of companies that have high-quality practices in place to manage the different elements of the thematic issues under consideration.
As part of the investment decision making process, Trinity Street’s investment team will review company documents and third-party research and undertake meetings with management. These reviews are documented and considered by the portfolio managers and wider investment team. The outcome of these discussions will have a direct impact on investment decisions and portfolio construction, and will inform the nature of ongoing dialogue and engagement with a company. This initial process sets out the foundations of Trinity Street’s approach to stewardship and engagement and is the basis of its relationship with companies post-investment.
Engagement and promotion activities are undertaken against a background in which ‘good governance’ has been assessed in pre-investment due diligence and monitored on an ongoing basis where investment has been made. Trinity Street’s assessment of good governance includes an appraisal of the following minimum criteria:
Where Trinity Street identifies that the quality of the governance practices at an investee firm are declining this will prompt engagement to drive improvements, with a similar escalation structure to that described under ‘Engagement Activity’ below.
Trinity Street’s approach to engagement and, where relevant at the product level, promotion is summarized in the schematic below:
Monitoring investments
All portfolio investments are subject to ongoing monitoring for delivery against investment objectives and may be subject to formal review during the investment period.
Trinity Street’s monitoring typically includes:
Trinity Street expects companies to comply with local regulations and as applicable governance codes on an ongoing basis.
Proxy Voting
As an SEC registered investment adviser, Trinity Street is required to have a documented Proxy Voting Policy and associated procedures in compliance with Rule 206(4)-6 of the Investment Advisers Act of 1940. Trinity Street’s clients can request a copy of the Firm’s Proxy Voting Policy and procedures from the Chief Compliance Officer. Trinity Street does not disclose this information to non-clients.
For a number of accounts managed by Trinity Street, third party vendor electronic voting services are used (such as Broadridge Proxy Edge). Trinity Street does not carry out stock lending on the accounts it manages.
The voting process is led by the investment team, utilizing the Institutional Shareholder Services (ISS) proprietary web-based voting and research platform to access research reports for supplementary analysis. Voting decisions may or may not be in line with ISS’s voting recommendations. All voting decisions are considered on a case-by-case basis in the best interests of clients, and with consideration of any engagement with the investee company.
Trinity Street’s investment team aims to vote on all proxies presented. Where concerns arise the investment team seeks to address these through engagement with company management and / or other key stakeholders.
Where the Firm serves as investment manager or adviser it is generally, subject to mandate restrictions, responsible for voting proxies and taking decisions in connection with proxy voting.
Engagement Activity
As an active manager, Trinity Street believes that stewardship and engagement help to safeguard and enhance the risk-adjusted returns of client investments. Where possible, Trinity Street seeks to maintain constructive dialogue with investee company management. Stewardship activities are undertaken by the investment team as part of the ongoing engagement with investee companies.
Trinity Street expects companies to comply with local regulations and governance codes.
In situations where investee companies do not have sufficient high-quality practices in place, either identified during the pre-investment phase or due to developments during the investment period, Trinity Street will actively engage as necessary and as described below. This engagement process includes an escalation hierarchy in cases of issues not being sufficiently addressed:
For specific products, where relevant, the Firm will report on the number of company engagements relevant to the particular thematic issues, including detail on outcome: acknowledgement from the company that topic management requires increased focus; action on improved process to manage the specific issue; improved disclosure on the management of the specific issue.
At Trinity Street’s discretion further engagement actions will be considered, which may include: additional calls or meetings; meeting with board members to escalate issues to the highest governing body; submission of shareholder resolutions; voting against individual directors or the board and/or management; divestment if in Trinity Street’s view engagement is not proving successful in avoiding negative outcomes for the level or duration of earnings and cash flows, or issuer cost of capital, from the effect of the issues identified.
Communication
Part of the responsibility that comes with being an investor is to engage with companies on matters that could affect long-term returns. It also requires the Firm to listen actively, rather than simply to instruct. Understanding why a course of action has been followed creates the foundation on which meaningful engagement can occur.
Where the Firm concludes that client interests are best served by a vote against management, this may be an indication that there may be an issue with the quality of the business, which may lead to questions over the investment case. Alternatively, it may be an opportunity for engagement with management to better understand thinking, which may be more constructive to shareholder value and client best interests than voting anonymously. A common topic for engagement is company incentive structures and alignment of interests. Where the Firm believes proposals are not in clients’ best interests, or where engagement proves unsuccessful, the Firm would vote against a resolution.
Conducting dialogue with investee companies
Trinity’s dialogue with investee companies takes place throughout the life of the investment and can cover any issue that may affect a company’s ability to deliver long-term performance and create shareholder value.
The Trinity Street investment team seeks to engage positively with companies to address any issues through discussions and agreement.
The Firm expects investee companies to respond to requests in a timely manner. Where companies fail to respond or to appropriately engage in dialogue on the issues raised, the investment team may review its investment decision in consideration of the materiality of the issue and its impact on the long-term success of the company.
Trinity Street logs and records the detail of engagement activities, including the final outcome.
Conflicts of Interest
Trinity Street is required to prevent or manage conflicts and maintains conflicts of interest policies and procedures accordingly. Conflicts arising between the Firm and a client are to be resolved in favour of the client.
Trinity Street has clear processes to identify, prevent and manage conflicts of interest. The Firm may not vote in the same manner for all clients. Segregated account guidelines may vary in line with client requirements. Trinity Street will accommodate clients who have utilised their own exclusion list based on their own sustainability and ethical criteria.
Cooperating with other investors
From time to time, where the investment team believes that it is in the best interest of clients to do so, Trinity Street may undertake collective engagement or collaborate with other investors in investee companies. Such collaboration will only take place where Trinity Street is satisfied as to the client best interest and that such collaboration or action can be taken in compliance with applicable laws and regulations, including competition law, any applicable takeover panel practices and conflicts of interest requirements.
In deciding whether to not to engage or act collectively with other investors, Trinity Street will consider a range of other factors, including:
General
For further information on any of the matters described above, please contact either client services at [email protected], or [email protected]
This statement was last reviewed in December 2024.
[1] Disclosure of commitment to FRC Stewardship Code COBS 2.2A.5
[2] Engagement Policy and disclosure of information – COBS 2.2B5
